share of memetic strains AMC Entertainment Holdings (AMC -4.01%), Hubo TV (Father and mother -1.58%)When smile direct club (SDC 6.79%) It was the big winner of the week. They were up 14.8%, 27.4% and 20% respectively through Thursday trading.
If stocks are beaten and sold significantly short, as these three have been, there could be a big bounce. Even after this week’s rally, AMC Entertainment has fallen 25% over the past year, with 18.4% of its shares sold short as of July 15th. SmileDirectClub fell 74% of his, with 21% of its shares sold short. Meanwhile, fuboTV fell 87% of his, with nearly 30% of the stock sold short.
Two catalysts likely fueled this week’s gains. Positive macroeconomic news may have covered shorts and encouraged retail investors to speculate in riskier stocks. Additionally, company-specific developments from all three companies may have resulted in above-average profits.
On the macroeconomic side, Wednesday’s Consumer Price Index (CPI) report showed July inflation to be lower than had been feared. Many take the numbers as a sign that post-pandemic inflationary fever is waning. After all, this was the first monthly report in a long time to show no month-over-month inflation.
When inflation worries recede, stock prices rise, but economically sensitive, crashing and risky stocks typically rise much more than that. This includes memetic strains like these three.
Market-wide factors aside, all three companies recently reported earnings. SmileDirectClub reported this week, and fuboTV and AMC reported last week.
Did they report good numbers? No. In fact, all three stocks underperformed analyst earnings expectations. Also, AMC and Fubo reported higher-than-expected losses, but all three showed operating losses.
It doesn’t really look like a recipe for big stock gains. But market sentiment is now focused on what works and companies have announced some interesting new business developments. Did.
AMC Entertainment Holdings
On its earnings call last week, AMC announced that it would issue a special dividend to current shareholders consisting of one new preferred stock unit trading under the ticker symbol “APE” and backed by a non-fungible token (NFT). did.
This is somewhat odd given that it is not clear what value will be attributed to the new preferred units and common stock. Still, the Preferred Units will start trading on August 22nd, so some may be buying AMC this week in anticipation of preferred stock dividends.
Why create a new preferred stock class? Unfortunately, it doesn’t seem to be a great reason. After raising a series of shares in 2020 and early 2021 to weather the pandemic, AMC management had promised shareholders last year that it would not issue new shares or further dilute its shares.
However, AMC wants to raise more money and seems to be able to get around this constraint by issuing preferred stock and selling more preferred stock classes to raise more money. Management appears to be trying to appease common shareholders by giving them preferred stock ahead of a potential capital increase, but the price at which AMC will issue new preferred units and how much common shareholders will ultimately be diluted No one knows what to do. .
Meanwhile, fuboTV had two big content-related news this week. For one, he announced that the SportsGrid Network, the nation’s first 24/7 streaming network dedicated to sports betting, would launch on fuboTV. This follows his Fubo earnings report last week, when the company announced it would undergo a “strategic review” of its sportsbook division. However, Fubo still seems bent on sports betting and has not pursued this costly endeavor per se.
That bit of positive news follows Monday’s announcement of a multi-year first-look deal for unscripted content from Ryan Reynolds’ Maximum Effort production company. issued $10,000 worth of FuboTV common stock.
The two deals seem to have generated optimism that Fubo can attract differentiated content to its platform, and the company’s stock price soared as a result.
smile direct club
Finally, SmileDirectClub was the only company out of the three to report earnings this week, giving investors a roller coaster ride. The company reported second-quarter results on Tuesday night, showing misses in both earnings and net loss per share, and also lowered its full-year guidance.
Stocks plunged Wednesday, but that was the day of the CPI report, and the market as a whole surged. It was probably the result of a big short squeeze.
The short squeeze could have simply been profit taking by the short seller. It could also have been a reaction to management’s announcement of a new Smile Maker 3D scanning app, which is expected to be announced in the fourth or first quarter of next year.
An AI-powered smartphone app allows prospective customers to scan their mouths and receive detailed treatment plans. Currently, these customers must go to an approved dentist or Smile Her Direct retailer or create a seal at home to begin the process. The result of years of development, the new app can therefore greatly streamline the process and reduce customer acquisition costs.
There are bullish cases for each of these stocks, but the road is narrow. AMC Entertainment investors will have to believe that movie theaters will continue to improve their finances as the economy reopens, but in the age of streaming, that’s pretty uncertain. is acquiring subscribers for fuboTV from a small base, but faces stiff competition from larger, well-funded peers such as: alphabet‘s YouTube TV. SmileDirectClub also faces a difficult macroeconomic environment and intense legal resistance from state dental commissions. Of further concern for AMC and SmileDirectClub is that they each have troubled debt. This poses a significant risk in this rising interest rate environment.
So even with these eye-popping moves this week, investors should be aware that none of the three stocks are “safe.” Despite being still well below all-time highs, they are still speculative investments.